Monday, June 13, 2011
Tolerance for S&P Downgrades
S&P can't take this market down for long anymore. Another downgrade of Greece by S&P and the market and the euro dipped and shrugged it off to go higher. The market is no longer vulnerable to these downgrades, they are pretty much priced in. Greece is such an old story that it doesn't pack much of a punch. We are at levels where it is dangerous to be short. I will be looking mostly for longs in the near term.
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5 comments:
If I had one dollar for every time I've read the words "support level" these past few days!
I'm starting to agree with those that say this year has been trading similar to last.
The only big difference I see between them, is we had QE2 save us last year. Can you imagine where the markets would have gone if the fed didn't create the temporary "wealth effect"!
Sell into rallies unless we see improving economic growth or QE3.
Trading is similar to 2004. If 2011-2013 <=> 2009 - 2010 will equal 2005-2007 <=> 2003-2004 then we can see the S&P500 double again in the next years easily ;)
There's nothing similar about 2011 to 2010, or do you think this looks like a flash crash and multiple single-day double digit moves in large cap stocks?
2011 is not 2010. The economic data is not as bad this time around. But the valuations are higher so there is a give and take. In 2010, there was real fear and the moves were much sharper. In 2011, the market just looks tired and doesn't want to go higher, but the Fed money has prevented it from going lower.
The end of QE2 doesn't mean the money out there shrinks. It just means they aren't going to be adding to their balance sheet. The excess money will still be sloshing out there, it just won't be increasing. I don't know how that corresponds to the market going down. It would correspond to the market doing nothing.
I said the MARKETS are trading like last year..not the economy.
And they are very similar.
We already had a decent pullback and are in the mist of a larger one, that will last into the summer before rallying into the end of the year.
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